I want to block the IP traffic between any 2 hosts on a switched ethernet
LAN. Will setting all the possible IP addresses on a linux machine in the
LAN do the trick or there is another easier solution?
You need to arrange to have the linux machine running as that switch, which is unlikely to be practical.
See if your switch has such options (if it's a high end device). Otherwise your best option is to segregate the two LAN's and then route or bridge between then, the linux box will do filtering in the middle.
You haven't said what you are trying to achieve, so it's hard to offer better suggestions
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